TCS Daily

Socialism's Farewell Note

The proposed European Constitution represents the last gasp of European
socialism. With its 260 pages and 70,000 words, it is one of the
longest and most uninspiring farewell notes in human history. Like the
Roman Emperor Diocletian, who tried to avert the demise of his weak and
economically mismanaged empire by carving his absurd decrees in stone,
Giscard D'Estaing and his fellow all-too-conventional
"conventionalists" labored for months to codify Europe's venerated
model of "social market economy." History suggests that their efforts
will have been in vain.

There
are two ways to deal with increasing competition: one is to become more
productive and the other is to form a cartel. The first way encourages
economic and social progress, while the second enforces the status quo.
By creating the "United Fortress of Europe," the European Convention
opted for the latter way of dealing with the forces of globalization.

The
European decision-makers could have tackled the challenges of the new
century by transforming the EU into a vibrant economic powerhouse. They
could have liberalized the rigid European labor market, eased the
weight of a plethora of high taxes and reduced the 97,000 pages of
regulations.

Instead, they chose to withdraw behind a wall of
high tariffs, buttressed by a panoply of subsidies and fortified by
prohibitive labor and environmental standards. Worst of all, the
prosperity of the European peoples will increasingly be subjected to
the whims of a multitude of central planners in Brussels.

Drawing
on the intellectual legacy of the proponents of the Scottish
Enlightenment, the Austrian economist Friedrich Hayek showed that it
was not possible to centrally plan complex social systems because the
planners in charge did not have sufficient information. Soviet central
planning, for instance, was unsustainable because it could not rely on
the price system to point out the real needs of the economy. The best
social systems develop through a process of trial and error called
"evolution."

Such evolution, however, is exactly what the
European Constitution undermines. With the exception of direct taxes
and foreign policy, virtually all of the social and economic policies
of the EU states will be "harmonized" at the pan-European level.
Whatever Schumpeterian "creative destruction" of the competitive
process remains among the European states, will be eroded through
recourse to the concepts of disloyalty and competitive distortion-those
Trojan Horses cleverly included in the Constitutional draft.

From
an economic perspective, it is not clear why the EU should be heavily
centralized. The free market is perfectly capable of increasing
European standards of living without the need to regulate the shape of
bananas, the size of peaches, and the width of carrots, as some of the
more infamous EU laws do. If, on the other hand, the reason for the
European Constitution is a political one -- namely to check the power
of the United States -- then there are clear lessons that the Europeans
ought to learn from the American Founding Fathers.

The
American Constitution has 4,500 words, barely enough to fill 17 A-4
sized pages. Remarkably, it has been relatively successful, undergoing
only modest changes over the past 200 years. It was under the authority
of that sparsely worded document that the United States emerged as the
world's only economic and political superpower. But the difference
between the two documents goes beyond their respective lengths. Instead
of proscribing competition, the American Constitution encourages it.
The powers of the central government are "delegated, enumerated, and
thus limited." There are few loose ends.

Why did the Founding Fathers go to all the trouble of delineating the powers of the central government so precisely?

Because
they understood only too well that the biggest obstacle to humanity's
material and social progress was a distant and unaccountable
government. It was that form of government that the Americans fought
during the War of Independence. It is that form of government that will
now be imposed on the European public. What a pity that Europe could
not produce the likes of Jefferson and Madison to guide them into the
future.

Marian L. Tupy is associate director of the Project on Global Economic Liberty at the Cato Institute.